Electronic Arts Earnings Preview: Here’s Your Deep Analytical Dive

The following is an excerpt from a report compiled by Michael Pachter of Wedbush Securities.

Electronic Arts (NASDAQ:EA) will report Q3 FY:13 (ending December) results after the market close on Wednesday, January 30, and will host a conference call at 2:00pm PT (dial-In: 773-799-3213, passcode: EA, webcast: ir.ea.com).

Expecting Q3 results at the mid-point of guidance. Our estimates for revenue of $1.33 billion and EPS of $0.61 are probably too high, compared with consensus for $1.29 billion and $0.56, and guidance for $1.25 – 1.35 billion and $0.50 – 0.60. We believe sales were led by new releases Medal of Honor: Warfighter and Need for Speed: Most Wanted, and catalog titles FIFA Soccer 13 and Madden NFL 13.

International sales of FIFA and Need for Speed to offset domestic weakness. According to NPD, EA’s Q3 U.S. software sales were down 43% y-o-y, implying an ≈ $527 million drop in packaged goods (“PG”) revenue in our model (we estimated a decline of ≈ $316 million). However, EA likely made up for this shortfall through international sales (not captured by NPD) of FIFA and Need for Speed, both of which have historically performed much better overseas. In addition, we modeled only $14 million (≈ 4%) of digital growth, with the most upside potential from Origin. We note that EA also has $392 million remaining in its share repurchase program.